Hearthside Food Solutions has paid $4.5m to settle a child labour investigation dating back nearly two years.

The US-based snacks business, which filed for bankruptcy last month, said in a statement sent to Just Food that it had “reached an efficient resolution" with the Illinois Office of the Attorney General and the Illinois Department of Labor.

The company said the settlement "protects its customers and their brands, avoids the costs, resources, and time associated with further litigation, and allows Hearthside to refocus its efforts on driving its ongoing workforce transformation while positioning itself for future growth”.

Illinois-headquartered Hearthside denied any liability when agreeing the settlement.

“To be clear, Hearthside’s agreement to pay the settlement amount is in no way an admission, concern, or concession as to liability, wrongdoing, or any violation of law,” it said.

The allegations of Hearthside’s use of child labour date back to early 2023 when a report in the New York Times newspaper claimed the company employed migrant children at its Grand Rapids, Michigan, facility.

In response, Hearthside, which was acquired by private-equity firms Charlesbank Capital Partners and Partners Group Holding AG in 2018, maintained it had never knowingly employed underage labour in any of its facilities and said the problems were connected to “one or more third-party staffing agencies”.

As part of the settlement agreement contained in papers filed in a Texas bankruptcy court on Friday (6 December), Hearthside committed to only contracting with staffing agencies that use "best practices" in future.

“Hearthside has already committed substantial resources and doubled down on the prioritisation and implementation of best-in-class employment practices, and therefore welcomes these additional measures to ensure the health and safety of its employees and advance related industry standards,” it said.

The company has also agreed to set up an email inbox and telephone hotlines for employees to report alleged incidents of minors working at its Illinois facilities.

Hearthside, which operates a network of 28 production plants, employing approximately 12,100 workers, said it now “looks forward to moving the company into the future on strong footing, leaving past challenges behind, and positioning the business for sustained growth as we continue to deliver best-in-class, quality products and services that customers can depend on”.

The company said the settlement avoids litigation and helps facilitate its Chapter 11 bankruptcy reorganisation.

Last month, it filed for Chapter 11 after facing difficulties in refinancing its debt.

The frozen burritos and cracker maker entered into a restructuring agreement that would allow it to shed more than $1.9bn of debt and obtain $200m in new equity once it exits Chapter 11.

The group said a restructuring support agreement (RSA) with its shareholders would allow it to “right size” its balance sheet.

Hearthside also said the RSA will provide the company with “substantial” equity capital and position it for long-term growth.

The company expects to emerge from bankruptcy by the first quarter of next year.